Though stronger than expected, the rate of inflation in April slowed for the first time in eight months, but experts still aren’t sure how long it will take for prices to return to normal levels—even if the worst has finally passed.
Overall prices rose 0.3% from March—higher than the 0.2% economists were expecting but much lower than the previous month’s increase of 1.2%, according to data released by the Labor Department on Wednesday.
On a yearly basis, prices jumped 8.3% last month, falling from 8.5% in March but exceeding expectations calling for an increase of 8.1%; the slowdown marked the first month-over-month decline since August.
The overall increase was the result of broad upticks across shelter, food, airline fares and new vehicle prices, while a month-over-month decline of 6.1% in long-surging gasoline prices (which spiked 18% in March) helped offset the gains, the government said.
Core inflation, which excludes volatile food and energy prices, rose 0.6% in April after a 0.3% uptick in March—a “seriously disappointing” jump given expectations for a 0.4% increase, Pantheon Macroeconomics chief economist Ian Shepherdson said in an email Wednesday, pointing out a 1.1% increase in new vehicle prices was “significantly bigger” than in recent months.
In a weekend note to clients, Goldman Sachs economist Ronnie Walker cautioned the inflation outlook remains “highly uncertain” due to lingering supply chains, red-hot wage growth and still-surging commodity prices—with gas prices, for example, jumping to record highs on Tuesday.
The economist expects shelter inflation will remain firm amid the tightest housing market in decades, while price spikes driven by supply chain constraints will “fall sharply” as bottlenecks ease, particularly in used cars and consumer electronics, which saw prices continue to fall in April.
“The slight moderation in inflation will likely provide some needed boost in consumer confidence,” Jeffrey Roach, chief economist for LPL Financial, said in emailed comments Wednesday. “Investors and policy makers both know inflation will likely stay above target for a while but both will focus on the direction of the change.”Stocks fell immediate after the Wednesday CPI report, with S&P 500 futures falling 1.1% by 9:05 a.m. ET, while Nasdaq futures plunged 1.8%.
The reopening economy and fiscal stimulus helped fuel one of the strongest starts to a bull market ever during the pandemic, but stocks have struggled this year as the Fed raises rates and unwinds economic support to ease inflation.
After rising 27% in 2021, the S&P has fallen 17% this year, while the Nasdaq has flirted with bear-market territory, plummeting as much as 26%. “A repricing of stocks is currently taking place due to rising interest rates, which mathematically makes stocks less attractive,” explains David Bahnsen, chief investment officer of $3.6 billion advisory The Bahnsen Group.
I’m a senior reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at
.
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